<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Oil prices rebounded Wednesday, after the market received a boost from surging stocks amid renewed hopes for a drug to fight coronavirus.” data-reactid=”19″>Oil prices rebounded Wednesday, after the market received a boost from surging stocks amid renewed hopes for a drug to fight coronavirus.

The price of oil plummeted to historic lows earlier this month as the coronavirus pandemic crushed demand. On Wednesday, WTI crude oil was trading at $16 a barrel (June contract), up 25.69%.

“Crude oil has stabilized following the carnage that followed the collapse and move to negative prices of the now expired May contract,” Ole Hansen, head of commodity strategy at Saxo Bank, says in a note.

The short-term fundamental outlook remains very disturbing given the potential need for more than 15 million barrels a day of forced shut-ins from producers around the world, the strategist says.

Oil’s Recovery Drivers

The recovery led by WTI crude was driven by hopes that the Energy Information Administration’s weekly inventory report would show signs of a bottom in demand, Hansen says.

“In addition, the market has just received an additional boost from surging stocks amid renewed hopes for a drug to fight the coronavirus.”

Once the world runs out of facilities to store unwanted crude oil, production needs to equal demand, and this can only be achieved by a major cut in production, the strategist says. It won’t necessarily come from the high cost producers, but primarily from those who don’t have a buyer for their oil, he says.

“Norwegian-based Rystad Energy in their latest report said they expect demand to drop by 28 million barrels per day this month; by 21 million next month; and by 16 million in June. Goldman Sachs in another report saw global storage facilities filling up within the next month.”

FILE – In this Thursday, Aug. 31, 2017, file photo, a flame burns at the Shell Deer Park oil refinery in Deer Park, Texas. Oil prices are plunging Sunday, March 8, 2020, amid worries that an OPEC dispute will lead a virus-weakened economy to be awash in an oversupply of crude.

OPEC and allied nations agreed Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to encourage stability in energy markets hard hit by the coronavirus-induced global economic crisis.

Ministers of the cartel and outside nations led by Russia met via video conference to adopt the measure, aimed at cutting the excess production depressing prices as global aviation remains largely grounded due to the pandemic. The curbed output represents some 10% of the world’s overall supply.

But danger still lurks for the market, even as a number of nations ease virus-related lockdowns, and enforcing compliance remains thorny.

Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned meeting attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.

That was a message echoed by Saudi Oil Minister Abdulaziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when U.S. oil futures plunged below zero.

The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision.”

But it is only a one-month extension of a production cut that was deep enough “to keep prices from going so low that it creates global financial risk but not enough to make prices very high, which would be a burden to consumers in a recessionary time,” said Amy Myers Jaffe, senior fellow at the Council for Foreign Relations.

“There is so much uncertainty that I think they took a conservative approach,” she said. “You don’t know how much production is going to come back on. You don’t know what’s going to happen with demand. You don’t know if there’s going to be a second (pandemic) wave.”

Jaffe said improved oil demand in China and Asia and a gradual stabilization of demand in the United States and to some extent Europe, where there’s some cautious economic reopening, were encouraging for producers.

OPEC has 13 member states and is largely dominated by oil-rich Saudi Arabia. The additional countries involved part in the so-called OPEC Plus accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.

Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.

Earlier this year, when demand was down, Saudi Arabia was flooding the market with crude oil, helping to send prices down to record lows. That prompted the U.S. government in April to take the unusual step of getting involved in OPEC’s negotiations, pressuring members of the cartel to agree to cuts to help end the oil price free-fall.

At the time, President Donald Trump said the U.S. would help take on some of the cuts that Mexico was unwilling to make. And perhaps more importantly, a group of U.S. senators upset over the impact on U.S. shale production said at the time that they had drafted legislation which would remove American forces, including Patriot Missile batteries, from Saudi Arabia.

Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.

In a rambling Rose Garden speech on Friday, Trump took credit for the April deal. “People said that wasn’t possible but we got Saudi Arabia, Russia and others to cut back substantially,” he said. “We appreciate that very much.”

U.S. Energy Secretary Dan Brouillette tweeted his applause Saturday for the extension, which he said comes “at a pivotal time as oil demand continues to recover and economies reopen around the world.”

Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported https://www.telegraph.co.uk/business/2020/06/06/hsbc-warns-downing-street-chinese-reprisals-huawei, citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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Tucker made the claim in private representations to British Prime Minster Boris Johnson’s advisers, the newspaper reported here citing industry and political sources.

Britain designated Huawei a “high-risk vendor” in January, capping its 5G involvement at 35% and excluding it from the data-heavy core of the network. It is looking at the possibility of phasing Huawei out of its 5G network completely by 2023, according to officials.

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